Eco 201 Module 2 Case

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TUI UNIVERSITY Julia Maldonado Module 2 Case Assignment ECO 201: Microeconomics Dr. Benjamin Yeo 10 March 2013 Any publicity can have an impact on the popularity of a product; therefore, its demand would change, and affect the price. Positive findings could increase the demand for coffee. If this happens, farmers could increase the amount that they sell their beans for, making the price rise. If it were widely believed that coffee reduced weight gain, its demand and price would tremendously increase. However, just the same, negative reviews can reduce the demand. An example would be: “a definitive finding that the caffeine in coffee contributes to heart disease, which is currently being debated in the scientific community, could change preferences and reduce the demand for coffee.” (Principles of Economics) In this case, the price would go down. When something is in shortage for any reason, the price of the product goes up because there’s less of it to go around. For coffee in particular, droughts may affect how many beans can be harvested. The textbook says, “Storms, insect infestations, and drought affect agricultural production and thus the supply of agricultural goods. If something destroys a substantial part of an agricultural crop, the supply curve will shift to the left.” (Principles of Economics) When a substitute for any product becomes less expensive, the product will see a shift in demand. “In general, if a reduction in the price of one good increases the demand for another, the two goods are called complements. If a reduction in the price of one good reduces the demand for another, the two goods are called substitutes. These definitions hold in reverse as well: two goods are complements if an increase in the price of one reduces the demand for the other, and they are substitutes if an
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